The profitability of ALROSA diamond baskets in rubles has increased, despite the decline in prices for precious stones on the world market
[ad_1]
The profitability of diamond sales, despite the decline in prices in dollars, shows an increase in rubles due to the weakening of the national currency. Prices for inexpensive diamonds are falling the most, while rarer diamonds are falling in price more slowly. The global diamond jewelry market, according to ALROSA estimates, will show a slight decline at the end of the year to $82–84 billion, however, supported by the activity of buyers from the Asia-Pacific region, it will still be higher than the pre-pandemic level.
The profitability of ALROSA diamond baskets in rubles has increased, despite the decline in prices for precious stones on the world market, says the report of the company “Investing in Diamonds” (available to Kommersant). In 2022, the company offered investors investment diamonds: baskets consisting of 18-22 colorless stones from 0.3 to 1.99 carats, and rare diamonds ranging in size from two carats with high color and quality characteristics.
The price declines that hit the hardest were relatively inexpensive diamonds weighing 0.3–2 carats and not of very high quality. Over the past 11 months, their value in dollars fell by 16%, but ruble yields excluding taxes due to the fall of the national currency increased by 46%. In this segment, prices are being pressured by high competition from lab-grown synthetic diamonds.
In more expensive segments, there is a more modest decline in dollar prices and a higher increase in profitability in rubles. Stones with high color quality characteristics continue to be in demand, ALROSA noted in its report. The change in value across the entire range of ALROSA rare diamonds from October 2022 to September 2023 was minus 5.8% in dollars and plus 64% in rubles. The cost of round three-carat investment diamonds decreased by an average of 9.5% in dollars and increased by 58% in rubles, while five-carat diamonds fell in price by 4% in dollars, with ruble prices rising by 67%.
For the first half of 2023, ALROSA’s revenue under IFRS remained approximately at the level of last year, amounting to 188.2 billion rubles, while the company’s net profit decreased by 35% year-on-year, to 55.6 billion rubles. The introduction of export duties, depending on the dollar exchange rate, will reduce ALROSA’s margins: according to calculations by My Investments analysts, the effect of duties on EBITDA will be 11–15%.
Global demand for diamonds will decline, according to the ALROSA report: according to the company’s forecast, pressure on the rough and polished diamond market will continue in 2023 due to tightening monetary policy in the US and Europe, inflation, economic uncertainty and a slower-than-expected recovery Chinese market. ALROSA, at the request of India, suspended diamond sales in September and October to stabilize the market. According to the company’s estimates, sales of diamond jewelry in the world at the end of the year will decrease slightly compared to 2022 and will amount to $82–84 billion, which is still higher than the pre-pandemic level. The main driver of growth will be the Asia-Pacific region.
Jewelry and colored stones, according to the annual Knight Frank Wealth Report, are regularly included in the top 10 investment objects for individuals, says Boris Krasnozhenov from Alfa Bank. Such investment objects, in contrast to investments in financial assets and real estate, are more conservative in nature, but regularly show stable increases in value. Over ten years, the cost of purchased investment-quality jewelry increased by 67%. Investment products with precious stones completely compensate for inflation, the analyst notes, and for a number of positions they provide returns that exceed the returns of stock indices during the “bullish” period.
[ad_2]
Source link
